This mitigates CVE-2020-14002: if you're in the habit of clicking OK
to unknown host keys (the TOFU policy - trust on first use), then an
active attacker looking to exploit that policy to substitute their own
host key in your first connection to a server can use the host key
algorithm order in your KEXINIT to (not wholly reliably) detect
whether you have a key already stored for this host, and if so, abort
their attack to avoid giving themself away.
However, for users who _don't_ use the TOFU policy and instead check
new host keys out of band, the dynamic policy is more useful. So it's
provided as a configurable option.
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